Tesla (NASDAQ:TSLA) stock has seen plenty of turbulence lately. And one recurring theme through the second quarter of 2022 has been layoffs.
When Elon Musk warned that the company would be laying off 10% of its workforce due to his economic fears, TSLA stock plunged. He ultimately walked back this claim but less than a month later, Tesla conducted a mass layoff, leading to a lawsuit from former employees. This news didn’t push TSLA stock down.
However, as it turns out, there may be another problem that ensues from the layoffs. Tesla’s rivals are rushing to recruit its laid off staffers.
A Loss for TSLA Stock, a Gain for Rivals
“Tesla Inc. workers facing layoffs should take heart — their services are in high demand by the company’s rivals and other tech giants,” reports the Silicon Valley Business Journal.
Indeed they are. Private executive network Punks and Pinstripes has released a report on Tesla’s former workers. According to its data, 457 workers have left Tesla over the past 90 days. Many companies are rushing to hire them, though, and Tesla’s top rivals are among them. The report found that Rivian (NASDAQ:RIVN) has hired 56 former-Tesla staffers, while Lucid Group (NASDAQ:LCID) hired 34. This means that 90 ex-Tesla employees are now employed by the EV producers looking to overtake it.
It’s no secret that Tesla is facing production problems. After it reported disappointing earnings for Q2 2022, factories in Shanghai and Berlin were placed on pause. This news came after Elon Musk referred to his factories as “giant money furnaces.” Now Musk has is hinting at “long-term trouble” ahead, giving TSLA stock investors more cause for concern.
Musk trimming Tesla’s workforce is clearly aimed at cutting costs at a difficult time. It’s not hard to see why he did it. But this is exactly the type of story that should be examined through a macro lens. When Tesla lays off qualified workers, the first logical move for the laid off staffers is to take their talents to fellow EV makers. And when they do, their new employers benefit at the expense of the former.
It’s no surprise that both Rivian and Lucid were so quick to hire ex-Tesla team members. At a time when Tesla is pausing production, both companies are expanding. Lucid recently secured approval to lease a factory facility in Arizona. And Rivian has been rising recently on positive delivery updates, the opposite of what investors have seen from Tesla. Both companies have outperformed TSLA stock this week.
The Road Ahead
Both Lucid and Rivian have made it clear that they want Tesla’s spot as leader of the EV race. Stocking up on former Tesla staffers is great way to ensure that they reach it. As these new additions to their teams help the companies grow and scale production, Tesla is likely to regret letting so many people go.
InvestorPlace senior analyst Luke Lango has long believed in Lucid’s growth potential. “My bullishness on LCID is derived from its elite EV technology and talent” he states. “Lucid’s team comprises folks from the two best consumer hardware companies on Earth — Tesla and Apple (NASDAQ:AAPL).”
Lango issued that take in April 2022. Now that Lucid has added even more former Tesla staffers, it will be better equipped than ever to keep growing. And as its rival continue to expand, Tesla will suffer as its market share shrinks.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
